3PL usage in India

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					3PL Practices in India

               Dr. B.S. Sahay
      Professor of Operations Management
 Chairman, Centre for Supply Chain Management




                   SCM


Centre for Supply Chain Management
  Management Development Institute
               Gurgaon, India
           Agenda for the Session
  •   Some Facts
  •   Business Challenges
  •   Why 3PL in India?
  •   3PL Practices in India
  •   Conclusions and Recommendations
  •   What should be done?


SCM
              Financial Improvements

                                        Percent
      Financial Indicator            Improvement
      Improvement in Sales Revenue      13.5%
      Working Capital Improvement       12.3%
      Capital Asset Reduction            9.2%
      Production Cost Reduction         10.5%
      Labor Cost Reduction              10.0%
      ROA Improvement                   10.0%
      Logistics Cost Reduction          15.0%

SCM
  Some Facts:

  • Annual Plan Outlay   : Rs. 1.13 Lakh Crores
  • Fiscal Deficit       : Rs. 1.35 Lakh Crores
                          (5.3% of GDP)
  • Inventory tied up    : Rs. 1.17 Lakh Crores
  • Logistics Cost       : 13.6% of our GDP
  • GDP                  : Rs. 25.57 Lakh Crores

SCM
      Logistics Cost
        Country                       GDP    Logistics
                                (billions)        as %
                                               of GDP
        Asian region
        China                        345          14.5
        Japan                       3363          10.5
        Korea                        283          12.4
        Singapore                     40          20.0
        Taiwan                       148          13.5
        European region
        France                      1200          11.7
        Germany                     1566          11.8
        Italy                       1151          12.6
        Netherlands                  286          12.2
        Spain                        527          12.1
        UK                          1015          12.2
        Sweden                       237          12.7
        North American region
        Canada                       593          11.8
SCM     Mexico                       208          14.4
        US                          5673          8.70
International Comparison of Customer Orientation
   Parameters   Product   Product   O n - T i m e A fter-Sales M a n a g i n g
                Quality   Design    Delivery        Service    D istribution

   India         41.08     34.05      30.27          41.08          52.43
   Brazil        52.39     56.62      36.34          39.15          51.83
   Thailand      63.00     58.50      57.00          54.00          66.50
   South         60.71     48.57      59.29          47.14          57.14
   Korea
   Canada        68.13     58.06      62.19          62.50          66.45
   USA           59.67     69.84      62.62          57.70          74.43
   Japan         92.68     81.46      93.17          89.76          72.20
   Germany       92.50     71.39      88.06          78.61          75.83
   France        55.94     66.96      44.64          45.56          66.09
   Netherla      72.89     63.11      69.78          68.44          74.76
   nds
 SCMt e :
  No            Companies are r ated 0=poor to 100=excellent
  Source:       World Competitiveness Report, 2000
          Business Challenges
  • Customer Expectation
  • Shortening of Product Life Cycles
  • World Competition
  • Shareholder Accountability
  • Competing Through Time

  • Return on Investment



SCM
                 Supply Chain Model
                                   Company

                                 Design   Market

Supplier’s Suppliers                                                   Customers/
                       Acquire      Convert   Distribute   Customers
 Supplier                                                               End users


                                 Mgmt     Control




         Information, product and fund flow (forward and reverse)

 SCM
          Logistics Management
        “Logistics Management is the process of
         planning, implementing and controlling
      the efficient cost-effective flow and storage of
      raw materials, in-process inventory, finished
             goods, and related information
      from point-of-origin to point-of-consumption
                    for the purpose of
          conforming to customer requirement”.
SCM
           Third Party Logistics

 • A 3PL provider is a company which supplies
   /co-ordinates logistics functions across
   multiple links in the supply chain.


 • The company acts as a ‘third party’ facilitator
   between seller/manufacturer (the ‘first party’)
   and buyer/user (the ‘second party’).”

SCM
            Research Objectives
 • To know the scenario of 3PL Practices in Indian
   Industry
 • To identify Critical Factors for evaluation,
   selection and relationship management with 3PL
   providers
 • To provide a benchmark for Indian firms looking
   to optimise their logistics operations
 • To project the future trends of 3PL services in
   India
SCM
         Research Methodology
      Consultation        Available World-wide Surveys         Indian Economic Scenario


                                 Design of Survey Questionnaire


                                                                  Pilot Survey
      Academic Study          Identification
              –                Companies
          India’s            Administration                       Data Analysis
      competitiveness,      of Questionnaire
       Global Supply                                       Questionnaire Modification
       Chain/logistics/
        3PL scenario
                               Administration of Questionnaire (by Post & Personal Visits)


                                                            Data Sorting & Evaluation
                             Interaction with
                               Respondent
                                                       Non response bias & Data Analysis


                                  Tabulation of Survey Findings

SCM                                   Research Conclusion
      Participation by Ownership
      126 valid responses, 112 Users, 14 3PL providers



                    Public Sector
                         3%



          Private
           34%



                                      Public Limited
                                          63%




SCM
      Participation by Turnover

                > 1000 cr              < 50 cr
                  18%                   22%



      500 to 1000 cr
           11%
                                           50 to 100 cr
                                               13%



                       100 to 500 cr
                           36%

SCM
                 Participation by Industry
                Automotive                                                             27.5

               Engineering                                                      22.9

                     Others                                                21

      Chemicals/ Fertilisers                     7.3

                     Metals                4.6

                     FMCG                  4.6

          Textiles/ Apparel              3.7

                   Services              3.7

      Telecommunications             2.8

             Transportation        1.8

SCM                            0           5           10    15       20          25      30

                                                   Percentage of Respondents
                      Themes
  •   3PL as a Strategic Tool for Corporate Growth
  •   3PL: A Critical Link to Supply Chain
  •   Logistics Activities Outsourced
  •   Logistics Cost
  •   Selection of 3PL provider
  •   Implementation Issues
  •   Evaluation of 3PL Providers
  •   Performance Measurement
  •   e-Logistics
  •   Future Trends in 3PL
SCM
 Theme 1: 3PL for Corporate Growth
      • Corporate Focus
        –   Higher Profitability
        –   Increased Sales and Market Share
        –   Enhanced Customer Service
        –   Reduced Costs


      • Highly Competitive Situation
        – Focus more on Core Activities

SCM
 Theme 1: 3PL for Corporate Growth
                               Reasons for Outsourcing
                  Logistics cost reduction                                              80.6

            Focus on core competencies                                             76.0

             Improved customer services                                           71.3

                Improve return on assets                                         68.2

               To increase inventory turn                                  60.6

                Productivity improvement                                  56.5

      Imbibe more flexibility in operations                        46.1

          Access to emerging technology                            45.3

  Access/ Expansion to unfamiliar market                      35.9

             Diverting capital investment              24.5

SCM                                           0   20          40      60           80          100

                                                   Percentage of Respondents
 Theme 1: 3PL for Corporate Growth
            Improvement in Business Objectives by using 3PL


                 Improve on time delivery                                           86.7

      More specialized logistics expertise                                        85.3

                       Reduced cycle time                                       79.8

         Improve focus on core activities                                       79.7

               Operational cost reduction                                    76.4

              Enhance geographic reach                                61.3

          Differentiation from competitors                          56.7

                          Facilitate growth                         56.1

           Strategic/ operational flexibility                      54.0

SCM                                             0   20     40      60        80        100
                                                    Percentage of Respondents
 Theme 2: 3PL A Critical Link to SC
           Improvement of the Functions in Selection of 3PL

      Customer service                                 65.8

                Sales                                  64.3

           Purchasing                                60.9

              Finance                         50.6

            Marketing                         50.6

         Manufacturing                     44.0

  Information systems                 37.5

                         0   20       40          60          80   100
SCM                               Percentage of Respondents
 Theme 2: 3PL A Critical Link to SC

                              Unimportant
                  Minimally       2%
                  important
                     5%                Very important
                                            19%
          Indifferent
             26%




                                        Important
                                          48%



SCM
 Theme 2: 3PL A Critical Link to SC
      Role of 3PL Services Providers as in Supply Chain Integration


                      Less than   No benefit
                      expected       3%         More than
                         6%                     expected
                                                  10%
                 Indifferent
                    15%




                                               Expected
                                                 66%


SCM
Theme 3: Logistics Activities Outsourced

                     Reduce
                      Costs
                                     Increase
       Globalize
                                      Market
        Business
                                     Coverage
       Operations
                      Why to
                    Outsourcing
                     Logistics?



    Customer                         Focus on Core
   Satisfaction     Flexibility in    Competency
                    Operations
 SCM
Theme 3: Logistics Activities Outsourced
                        Logistics Activities Outsourced

                Outbound transportation                                            55.7

                  Inbound transportation                                         52.2

          Customer clearing & forwarding                                         51.5

             Import/ Export management                            34.5

                 Outbound warehousing                             33.9

                   Inbound warehousing                      29.5

                  Labelling & Packaging                     29.0

       Fleet management & Consolidation                     28.6

                           Order picking                   27.0

                  Inventory management                   23.5

                                           0   10   20     30       40      50      60
 SCM
                                                Percentage of Respondents
Theme 3: Logistics Activities Outsourced
                   Major Reasons for not using 3PL Services
         Inability to respond to changing needs                                             84.6

       Poor infrastructure of providers company                                             84.0

                Lack of grasp of business goals                                            82.3

            Unreliable promises from providers                                             81.3

         Concerns about capability of providers                                          77.4

       Fear of leakage of important information                                          76.1

       Difficulty in gauging cost saving with 3PL                                        75.9

                  Lack of confidence in provider                                         75.4

                Non compatibility of IT systems                                     68.6

       Difficulty to manage and change provider                                     68.5

                          Fear of loss of control                                   68.5

                           Fear of retrenchment                  26.4
 SCM                                                0   10   20 30      40 50   60 70    80 90
                                                             Percentage of Respondents
           Theme 4: Logistics Cost

  •   Transportation costs
  •   Inventory Carrying Costs
  •   Order-Processing
  •   Losses
  •   Packaging
  •   Handling & Warehousing Costs
  •   Customers’ Shopping


SCM
                  Theme 4: Logistics Cost
         Major Components while measuring the Logistics Cost

                  Transportation management                                                     72.9


                       Inventory management                                              62.6

          Warehousing and distribution centre
                                                                        37.4
                    management

                      Customer services cost                           33.6


           Order management and processing                      25.2


                                   Packaging                    25.2


                        Production scheduling                   23.4


      Purchasing (excluding raw material cost)               20.6

SCM
                                                 0   10    20    30     40     50   60     70    80
                                                          Percentage of Respondents
      Theme 4: Logistics Cost
      Logistics Cost as Percentage of Gross Sales

                             >50%
                    20-50%
                              3%
                      2%
           10-20%
            17%
                                       0-5%
                                       39%




                5-10%
                 39%

SCM
   Theme 4: Logistics Cost
Percentage of Logistics Outsourced to 3PL providers


                  >80%
           60-80% 7%
             8%


      40-60%
       14%



       20-40%                     0-20%
         7%                        64%
Theme 5: Factors for 3PL Selection
    •   Core Competencies of 3PL Provider
    •   Cost of 3PL Services
    •   Information Handling Capability / Compatibility
    •   Breadth of Services Provided
    •   Past Experience of your Industry
    •   Technological Competencies of the Provider
    •   System Flexibility & Capacity
    •   Safety & Insurance Cover / Programs
    •   Geographical Location & Spread
    •   Company Reputation
    •   Responsiveness & Service Quality
SCM •   Management Structure & Quality of Workforce
Theme 5: Factors for 3PL Selection
                    Cost of 3PL services                                      63.1

                               Reliability                                    62.2

      Core competencies of 3PL provider                                   61.0

      Responsiveness and service quality                          45.8

            Service capability of provider                   37.9

  Technological competencies of provider              25.4

            Breadth of services provided              23.9

                   Geographical location          20.0

                                             0   20          40          60          80   100
SCM
                                                  Percentage of Respondents
Theme 5: Factors for 3PL Selection
                    3PL Contract / Agreement


    •   Expectations of both parties
    •   Penalties for non-performance
    •   Roles & Responsibilities
    •   Cost Structure
    •   Quality requirements
    •   Service Levels
    •   Performance Measures
    •   Periodical reviews
    •   Issue resolution mechanism
    •   Information exchange procedures
SCM •   Profit / gain sharing provision
Theme 5: Factors for 3PL Selection
                    Parameters used in 3PL contracts

    Penalties for non performance                                                      63.7
          Performance measures                                                        62.6
        Roles and responsibilities                                                    61.5
      Expectations of both parties                                                    61.5
                     Service level                                                59.3
                    Service costs                                                 59.3
             Quality requirements                                         49.5
   Periodical review of agreement                                         48.4
                  Flat rate pricing                                40.7
 Information exchange procedures                            31.9
       Transaction based pricing                        29.7
      Issue resolution mechanism                        28.9
   Percent gain-sharing provision         6.6

                                      0   10    20     30      40     50         60      70
                                                Percentage of Respondents
      Theme 6: Implementation Issues
       Critical Success Factors in Implementing 3PL Services


      • Well defined requirements
      • Close working relationship
      • Top management involvement
      • Clear demarcation of responsibilities
      • Joint (cross-functional) team for management
      • Well laid down system
      • Strong performance review

SCM
 Theme 6: Implementation Issues
   Critical Success Factors in Implementing 3PL Services

              Well defined system                                                     73.4

        Close working relationship                                                    73.3

       Strong performance review                                                67.8

Clear demarcation of responsibility                                            64.7

        Well defined requirements                                             62.4

    Top management involvement                                         52.3

            Cross functional team                               43.6

       Joint team for management                           36.6

                  Tiered structure                  24.6

                                      0   10   20    30    40     50     60     70     80
                                               Percentage of Respondents
 Theme 6: Implementation Issues
         Major Challenges in Implementing 3PL Services

                  Controlling cost                                             54.3

Maintaining customer service level                                             53.9

                  Communication                                  34.8

                    IT integration                             32.9

     Demarcation of responsibility                          30.7

              Information sharing                         28.8

          Monitoring performance                          28.0

       Reaching service definition                17.3

    Convincing internal personnel                16.0

                                     0   10       20      30       40     50     60
                                              Percentage of Respondents
         Theme 6: Implementation Issues
                                 Users & Providers Perception
                                            Controlling costs
                                                 5
                                                                 Customer Service
                  Information Sharing
                                                 4

   Reaching Service Definition                   3                          Gain Sharing


                                                 2

Convincing Internal Personnel                                                Communication




       Demarcation of Responsibility                                 IT Integration

                                        Monitoring Performance

 SCM                                        User          Provider
      Theme 6: Implementation Issues
                       Users & Providers Perception

                                               Mean score (5 very
       Major Challenges in implementation           important)
                    of contract             User          Provider
                                            Perception    Perception
       Controlling costs                             4.26         4.60
       Maintaining customer service level            4.16         4.30
       Gain sharing mgmt                             3.20         3.13
       Communication                                 3.89         4.10
       IT integration                                3.67         3.56
       Monitoring performance                        3.70         4.00
       Demarcation of responsibility                 3.65         3.89
       Convincing internal personnel                 3.28         4.22
       Reaching service definition                   3.47         3.44
       Information sharing                           3.74         4.30
SCM
Theme 7: Management & Partnerships
                Management Involvement in Partnerships

                                                       40.6
   Top management                                                              62.9

         Middle                                       38.0
       management                                   35.6

                                                    35.6
  Lower management
                                  18.3

                                             28.8
      Divisional level                                39.3

                                                           41.0
     Corporate level                                              47.9

                                                       40.3
               CEOs                                                49.2

                         0   10   20        30       40           50      60      70

                                   At partnership      As of now
                                       Percentage of Respondents
Theme 7: Management & Partnerships
 Perception of Top Management Performance of 3PL Providers



                               Ineffective
                 Indifferent
                                   1%        Very effective
                    13%
                                                 17%




                               Effective
                                 69%
Theme 7: Management & Partnerships
           How Companies perceive 3PL Services


               Collaborative
                   14%


     Non contractual
          9%




                                   Contractual
                                     77%
Theme 7: Management & Partnerships
         Perception of Relationship with 3PL Providers
                                                6.8
    Willing to make long term relations                                                         93.2

         Possess high level of integrity              14.4
                                                                                           85.6
                                                      15.1
                       Committed to us                                                     84.9

           Do not make false promises                 16.2
                                                                                          83.8
                                                        20.7
                   Concerned about us                                                    79.3
                                                           23.8
                             Loyal to us                                            76.2
                                                               30.6
               Share risks and rewards                                            69.4

    Alter facts slightly to get advantage                              45.2
                                                                           54.8

     Breach agreement to their benefit                                            69.5
                                                             30.5

                                            0         20          40       60       80           100

                                                             Agree       Disagree

                                                  Percentage of Respondents
Theme 7: Management & Partnerships
           User & Provider perceptions of their relationships



                                              Mean score (1 - strongly
                                                      agree)
                                              User       Provider
                Relationship Perception       Perception Perception
      Do not make false promises                   2.76          2.33
      Share risks and rewards                      3.09          2.33
      Concerned                                    2.80          1.92
      Committed                                    2.51          2.00
      Loyal                                        2.71          2.33
      Willing to make long term relations          2.31          1.50
      Alter facts slightly to get advantage        3.22         2.82
      Breach agreement to their benefit            3.82         3.55

SCM
Theme 8: 3PL Performance Evaluation
                Performance Measures commonly used


      •   On time shipment
      •   Inventory accuracy
      •   Customer complaints
      •   Shipping errors
      •   Backorders
      •   Warehouse cycle time
      •   Total order cycle time
      •   Stock outs
      •   Fill rates

SCM
Theme 8: 3PL Performance Evaluation

               Use of Joint Teams and Partnership Levels


                                                                 55.0
  Non-contractual
                                                        45.0


                                                                 55.0
      Contractual
                                                        45.0


                             15.4
    Collaborative
                                                                                      84.6


                    0   10     20        30       40       50      60       70   80     90

                                    Have joint teams   Do not have joint teams

                                         Percentage of Respondents
Theme 8: 3PL Performance Evaluation
            User Perceptions of Performance measures

      Customers' complaints
           On time shipment
              Shipping errors
          Inventory accuracy
       Total order cycle time
                   Stock outs
                  Backorders
                      Fill rates
      Warehouse cycle time
      Volume of Rs. Shipped

                                   0    20       40      60        80   100
SCM                                    Percentage of respondents
Theme 8: 3PL Performance Evaluation
        User - Provider Perceptions for Performance Measures

                                 On time shipment
                                            5


      Volume of Rs. Shipped             4.5
                                                           Customers' complaints
                                            4

                                        3.5

                                            3
             Fill rates                                           Inventory accuracy
                                        2.5




             Backorders                                        Shipping erors


            Total order cycle time                   Stock outs

SCM
                          User Perception       Provider Perception
Theme 8: 3PL Performance Evaluation

  • About 40% have ranked customer service amongst
    the top 3 as a reason for using 3PL services
  • Close to 30% of customer service personnel are
    involved in selection of 3PL providers
  • More than 80% of respondents use on time
    shipment and customer complaints as a significant
    performance measure




SCM
Theme 9: Performance Measurement
         Impact of use of 3PL on Firms


                  Negative   Very negative
                    2%            1%

                                  Very positive
                                      14%
        Average
         29%




                                    Positive
                                     54%
Theme 9: Performance Measurement
             Use Perception of Performance Measures

   Customer complaints                                                   85.7

      On time shipment                                              80.7

         Shipping errors                                            80.0

     Inventory accuracy                                           75.6

   Total order cycle time                                 56.7

              Stock outs                                 55.9

             Backorders                                 52.4

                Fill rates                          49.1

  Warehouse cycle time                            45.4

   Volume of Rs shipped                          42.1

                             0   20         40            60      80            100
                                      Percentage of Respondents
        Theme 10: E-Logistics
Improvement of IT Integration when evaluating and selecting

                   the 3PL service provider

                                 Not important
          Very important              11%
               21%
                                        Less important
                                             13%




          Moderately
           important                  Important
             29%                        26%
             Theme 10: E-Logistics
 IT based services important for 3PL contract implementation

        Shipment tracking/ tracing                                                    66.2
  Warehouse management system                                                       62.2
Transportation management system                                               57.3
     Supply chain planning system                                         53.3
       International documentation                                      48.5
     Supplier management system                                         48.3
      Freight payment/ accounting                                40.9
                 Company website                             38.7
                              EDI                            38.4
        Import/ Export applications                         36.9
       Internet order management                           34.8
   B2B e-market/ trading exchange                         32.3

                                      0   10   20    30     40      50         60     70
                                           Percentage of Respondents
         Theme 10: E-Logistics
Companies with e-commerce system in place or plan to have it



           Plan to have             Yes
               25%                  23%




                           No
                           52%
Theme 10: Future Trends in 3PL
                Activities planned to be outsourced


     Reverse logistics                                            57.4

 Inbound warehousing                                             55.8

Inventory management                                            54.4

           Distribution                                         54.3

     Order processing                                          53.7

Information technology                                         53.2

         Order picking                                         52.4

Outbound warehousing                                     48.2

Labelling & Packaging                                   46.8

                          0   10   20     30     40      50       60     70

                                   Percentage of Respondents
              Financial Improvements

                                        Percent
      Financial Indicator            Improvement
      Improvement in Sales Revenue      13.5%
      Working Capital Improvement       12.3%
      Capital Asset Reduction            9.2%
      Production Cost Reduction         10.5%
      Labor Cost Reduction              10.0%
      ROA Improvement                   10.0%
      Logistics Cost Reduction          15.0%

SCM
                                Comparative Analysis
Parameter                                    USA                                       India

Usage of 3PL                                 71%                                       55%

Common activities outsourced                 Warehousing (73.7%)                       Outbond Transportation (55%)

                                             Outbound Transportation (68.4%)           Inbound Transportation (52%)

                                             Freight bill payment (61.4%)              Custom clearing and forwarding (51%)

                                             Inbound warehousing (56.1%)

Reasons for not outsourcing                  Control would diminish (63%)              Poor infrastructure of provider (81%)

                                             Costs would be reduced (63%)              Inability to respond to changing needs (81%)

                                             Service commitment would not be met (48%) Unreliable promised from providers (80%)

                                             Logistics is a core competency (44%)      Concerns about capability of providers (77%)

Necessity of e-commerce                      72%                                       67%

Collaborative relationship                   82%                                       14%

Gain sharing is important for relationship   80%                                       6.60%


   SCM
Conclusions & Recommendations
• 55% companies use 3PL services in India one
  form or the other compared to 75% globally
• 3PL is the future, should be seen as a support to
  corporate growth
• Close to 60 % of 55% uses transportation and
  custom clearing & forwarding
• Of the rest 45%, 75% do not use 3PL services
  because they are not sure of provider’s
  capability
SCM
 Conclusions & Recommendations
  • Selection of proper 3PL provider is a must
    where top management should be involved at
    contract stage to avoid conflicts later on.
  • Contracts are used more to avoid risks rather
    than to develop relationship
  • 3PL providers feel that
      –   Users are unwilling to share information
      –   Do not show commitment towards the relationship
      –   Do not want to share rewards
SCM   –   Do not show interest in continuing the relationship
Conclusions & Recommendations
 • View 3PL as an equal partner
 • Collaborative relation is a foundation for
   success for 3PL services
 • Gain sharing between Users and providers
 • Use of IT in 3PL services is very low both by
   user and provider
 • Lower involvement of junior management staff
   during implementation process (only 18%
   showing high involvement)
SCM
Conclusions & Recommendations
 • Company should focus on outsourcing 3PL
   services like inventory management, order
   processing, labeling & packaging and reverse
   logistics




SCM
              Drawbacks of 3PL
  • Still requires top management's time to manage
    relationships & resources
  • Unable to cover full range of SC requirements e.g.
    logistics information, tech development...
  • Lack of shared goals...




SCM
      Fourth Party Logistics : 4PL

         The Fourth Party Logistics organization
        is one of the intermediate stages along the
               logistics sourcing spectrum
               that combines the benefit of
               outsourcing and insourcing.



SCM
      Logistics Sourcing Spectrum
       100% insourced
                                                      All logistics functions
            Client
                                                      conducted in-house

                         Logistics operations


                                                      Part of SC outsourced to
                                       3PL            an external provider
            Client




                                                3PL
            Client
                                                      4PL: long term
                             4PL                3PL   contract, equity or
                                                      JV

                                                3PL
SCM    100% outsourced
        4PL : differs from 3PL...
• The 4PL organization is often separate entity
  established as a joint venture or long term contract
  between a primarily client and one or more partners.
• It acts as single interface between the client and
  multiple logistics service providers.
• All aspects of the client’s supply chain are managed by
  the 4PL organisation.
• It is also possible for a major 3PL provider to form a
  4PL organisation within existing structure.

SCM
                             4PL Set-up
 Primary Client                   3PL Providers          Partners
 Contribution:                    Contribution:          Contribution:

 •   Start-up equity         • Transportation Services   •   Set-up equity
 •   Assets                  • WH facilities             •   Logistics strategy
 •   Working capital                                     •   IT development
 •   Operational expertise                               •   Customer service
 •   Operational staff                                   •    management
                                                         •   Supplier management
                                                         •   Logistics consultancy
                                                         •   Best practices



              Primary                   4PL
              Client(s)             Organisation              Partner(s)

SCM
         4PL : Key Characteristics
 • Hybrid organisation formed from a number of different
      entities
 •    Typically established as a JV or long term contract
 •    Responsible for management and operation of entire
      supply chain
 •    Continuous flow of information between partners and
      4PL organisation
 •    Potential for revenue generation


SCM
      4PL : Primary Client Model
                     Client limited in numbers



                              Client
          Primary                                   Client
           Client



                              4PL
                          Organisation




          Service                                Service
          provider           Service             provider
                             provider


SCM
                        External service provider
      4PL : Industry Solution Model
      Product manufacturers                         Service provider


              Company 1
                                                      Distribution
                                                    service manager

                                                         Client
                                  4PL
        Company 2             Organisation


                                                         3PL
                                                       Provider
              Company 3



SCM                       Pharmaceutical Industry
         4PL : SC Partners Model
                                    Suppliers

                Aluminium can                            Glass Mfr.
                     Mfr.

                                                                         Service
                                                                        providers
Manufacturers

         Primary                          4PL                           3PL
          Client                      Organisation                    provider




                   Soft drink                               Logistics
                     mfr.                                   manager




SCM                             Beverage Manufacturing Industry
                      Participation
  • A total of 163 responses consisting 142 Users and 21
    providers

Participation by Equity Stake        Participation by Ownership



                       MNC stake                           Private
                         44%        Public                  33%
Domestic                           Limited
 56%                                 64%

                                                       Public Sector
                                                           3%

SCM

				
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Global Supply Chain Council Global Supply Chain Council http://www.supplychains.com
About Founded in 2002, the Global Supply Chain Council is Asia’s leading professional organization serving a fast growing community of more than 60,000 executives and representing leading companies who view their value chains as a critical driver of shareholder value and competitiveness. As an independent professional organization, the Council’s mission is to stimulate the understanding and adoption of supply chain management by providing a range of services including websites, magazine, directory, newsletters, research, workgroups, conferences, maps, video programming among other services. Targeting manufacturers and retailers end-users on line, in print and in person, the Council delivers a unique combination of education and lead-generation sources that helps logistics service providers, consultants, and software vendors and equipment suppliers achieve their growth objectives.